Archive for July, 2011

Konami and Price Discrimination

Posted in Uncategorized on July 18, 2011 by reasoning13

Because Konami has a monopoly on the Yugioh CG, it’s able to increase prices up to the point of marginal consumption, eliminating consumer surplus, so it can maximize profits. This is called first degree price discrimination.[1]

The Japanese player base is less willing to spend hundreds of dollars to play than the American player base and so, the price that optimizes profit for Konami is different in the different regions.

Normally price discrimination is impossible because of competition and arbitrage, but because of Konami’s monopoly on the Yugioh CG, competition is not a problem and Konami ingeniously solved the arbitrage problem by not allowing OCG cards in the TCG.

You might object that the price of a pack of yugioh cards is no greater just because the best cards in the set are more rare. This is generally true, but if what you want are copies of a particular card, then you’ll have to buy more packs to obtain it.

Viewing this in the abstract, then, you have to pay more money, on average, to Konami to obtain a copy of Pot of Duality if Pot of Duality is a Secret Rare than if it is common. That is, Konami has raised the price of obtaining a Pot of Duality, in accordance with price discrimination, to maximize its profit.

Why not just raise the price of packs instead of bump up rarity? Making competitively desirable cards more rare has the added benefit of allowing price discrimination of its own.

Casual players and children generally aren’t willing to spend as much as competitive players on yugioh products but also desire cards like Pot of Duality less. An increase in the price of yugioh packs would price many casual players out of the game and therefore purchasing packs, or at least they would purchase fewer packs.

That’s Konami for you, ingeniously malevolent.

1 http://en.wikipedia.org/wiki/Price_discrimination#First_degree_price_discrimination

Advertisements